It has been another year of uncertainty, but it looks like the economy is bouncing back in a cautiously optimistic manner. Whether it’s pent-up consumer demand or higher disposable incomes, Canadians are giving their credit cards a workout heading into the holidays according to our most recent consumer credit trends and insights.
Canadians are spending more on their credit cards
The average monthly credit card spend per credit card holder is up by 4 per cent this quarter compared to the pre-pandemic period of Q3 2019, mainly driven by younger consumers under the age of 35.
Growth in spending hasn’t translated into an inability to pay off credit card balances
The average monthly payment per consumer has also increased, meaning this demographic isn’t facing climbing amounts of debt. “The good news is that we saw higher payments and a large fall in non-mortgage consumer debt during 2020 due to government support mechanisms, increased saving levels and reduced credit demand,” says AVP of Advanced Analytics at Equifax Canada Rebecca Oakes. “Average non-mortgage debt is still below pre-pandemic levels but it has been gradually increasing throughout 2021”.
Younger consumers are leading the way in new credit card demand
New card volume reaches pre-pandemic levels for consumers under the age 25. Oakes posits “Many consumers are eager to get back to pre-pandemic activities especially with the holidays approaching which is creating increased demand for certain goods and services. Inflation is likely being impacted as a result.” Demand for a wider variety of payment credit options has also increased, indicating that in order to remain competitive it’s important to offer a wide range of payment options for consumers.
Rising inflation and potential interest rate increases are a concern for consumer affordability
The continued rise in inflation has resulted in price increases across many industries; inflation increased by 4.7 per cent in October 2021 when compared to last year, the biggest year-over-year increase in 2021.
“Inflation is a very real concern. Food prices are up, and so are the prices for other commodities. Consumers must be cautious with their spending habits as higher prices on day-to-day goods can lead to an increased reliance on credit and rises in overall debt,” says Oakes.
Making informed credit risk decisions are important for the growth and sustainability of your portfolio. Higher prices may lead consumers to rely more on credit. A rise in credit usage could also cause lenders to see an increase in consumer delinquencies and insolvency levels. Careful monitoring of consumer spending and credit behaviour is still highly recommended for Canadian lenders.
We want to help Canadians live their financial best. To learn more about how our latest consumer credit trends can help you gain insights on markets and acquire new customers, please contact your Equifax Account Representative. You can also reach us directly at 1-855-233-9226 and follow us on Twitter and LinkedIn.
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